A review of Montebello Unified School District’s financial records has resulted in a scathing report by state auditors that alleges years of wasteful spending, mismanagement, hiring irregularities, poor leadership and cronyism. As a result, MUSD is on the brink of insolvency, allege state auditors.

“Taken as a whole, the concerns raised in this report call for significant change if Montebello is to avoid financial insolvency,” writes California State Auditor Elaine Howle in a letter to the governor and state lawmakers accompanying the report.

Earlier this year, MUSD came dangerously close to the Los Angeles County Office of Education sending in an overseer to get district finances in order. The audit alleges the District repeatedly failed to heed warnings about its precarious financial situation from the county office of education, the agency charged with its oversight.

Faced with nearly a $30 million budget shortfall over the next two years, the MUSD School Board considered laying off hundreds of school employees, including teachers. The board’s actions sparked months of angry protests from workers as well as students and parents, who accused board members of being corrupt, or at best, incapable of doing their job. They demanded the firing of some administrators, and decried the firing of others.

Two current board members were serviced with recall petitions.

Responding to the outcry from constituents, three local state lawmakers asked the state auditor to review District finances.

That audit is now complete and according to Howle, it “concludes that intervention is necessary to address Montebello’s weak financial management and governance.”

“Most significantly,” writes Howle, “Montebello is in danger of becoming financially insolvent,” in other words, unable to meet its financial obligations and putting the District’s 28,000 students at risk.

The audit notes that District employees attempted to destroy documents during the auditing process.

The audit cites MUSD’s failure to follow its own hiring practices and for employing individuals in unneeded, high-paying positions; not properly advertising job openings or vetting candidates for some of the District’s highest-ranking positions. It also alleges school board members hired people for high-ranking jobs who did not have the qualifications needed for the positions, including a former chief business officer who was responsible for the District’s $300 million budget, and was paid $186,000 a year.

And, despite warnings from the county, the District continued to overspend, according to state auditors.

They cited as an example the school district’s spending of hundreds of thousands of dollars on 200 computers at the same time the District was in “financial distress,” noting that staff could not locate 13 of the computers, 162 computers remained unopened in a warehouse for more than a year, and 25 were in classrooms but not being used.

Facing a $30 million two-year budget shortfall, MUSD board members voted to cut jobs, sparking months of protest in the school District. (EGP photo by Nancy Martinez)

The audit notes that lax oversight of millions of dollars in bond revenue made the funds rife for abuse. It questions whether some of the bond funding was inappropriately spent on salaries, and noted that insufficient documentation was available to justify some expenditures.

The audit goes on to recommend that within 90 days, the MUSD take corrective actions on how it hires and spends. They call for the superintendent of the County Office of Education to direct the MUSD to submit a correct action plan, develop a workforce hiring plan, and to implement other recommendations contained in the report, including “revising its financial stabilization plan and to make necessary cuts to fund its ongoing commitments.”

Responding to audit, MUSD board members issued a statement thanking the state for its review.

While they acknowledged some of the discrepancies and poor financial practices identified in the audit, the board’s statement primarily emphasizes that the audit did not find fraud or corruption to be the blame for MUSD’s financial crisis.

“The fact that the audit did not find any major instances of fraud, abuse or corruption at the District should provide our students, parents and employees with an assurance regarding the status of the District,” said MUSD Board President Lani Cupchoy. “We also believe the audit, coupled with the previous efforts undertaken by the District over the past year will result in improved governance and an even stronger, more responsive and transparent District.”

In the statement, Cupchoy and the other board members took credit for the audit, saying it was they who had asked state lawmakers to ask the state’s chief auditor to conduct the financial review.

They said the District is already working on implementing many of the recommendation made by state auditors.